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Here, we will look at why they are important, what they should include, and how to create a construction proposal that wins you bids.

What is a construction proposal?

A good construction proposal can be your showcase, your protection, a legal contract, and a great marketing and sales tool for your construction company.

It is much more detailed than a project bid and can help avoid conflict later on during the construction. Imagine if the project owner thought your part of the project was to include work you don’t perform–then you could easily refer to the construction proposal where you would show exactly what you have been contracted to do and where your obligations lie.

The construction proposal process will help you decide a project’s feasibility and whether the client’s expectations are realistic and achievable. If they aren’t, your proposal allows you to offer the client a realistic alternative that outlines exactly why your business proposal would work better.

Just by producing a good construction proposal, you can show proposed clients how well you know their construction project while also promoting your business, skills and reputation.

The construction proposal also includes task scheduling to monitor the build’s progress throughout the construction process. This ensures the job stays on track.

We recommend that you begin by looking at free construction proposal templates. Starting with a simple construction proposal template and then comparing that to a top-quality proposal template. Whatever construction proposal template you use, you must ensure that your proposals are presented in a professional way.

Key items to include in a construction proposal

Your construction proposal template should include:

•       The scope of work;
•       An estimate of the project cost;
•       The client’s information;
•       A payment schedule;
•       The start and finish dates;
•       What happens if there are hidden defects or unforeseeable conditions;
•       A work schedule;
•       What happens if there are any changes or extras needed during the build;
•       And, your warranty.

However, these are not the only things you need to consider. The construction proposal must be accurate, clear and easy-to-read with a good layout and personalized to your business. Importantly, it needs to be produced in a timely manner. There is no point in it if you complete it days after the clients have closed the bidding. 

Detailed Scope of Work

We recommend you spend a lot of time on this section, making it as detailed as possible, listing the services and tasks you provide. As mentioned, you don’t want to get stuck doing work you didn’t agree to because your scope of work wasn’t detailed enough.

Perhaps you are a contractor or renovator who specializes in cabinet making and carpentry, and suppose your client wants to have their kitchen and bathroom remodeled. You are happy to install the cabinets and cupboards, but you do not do tiling. Your construction proposal should detail the work you will do. If you use a sub-contractor to do the tiling, their information and estimated cost should be included. Making it clear who will be doing the tiling. 

Cost Estimate

Your cost estimate should also be very detailed, leaving nothing out. It needs to include all direct costs like labor (including sub-contractors), equipment, the quantity takeoff, which counts all the materials necessary to complete the build, plus an amount for allowances. You must also include all your indirect costs, like rent on your office and running costs.

Owner information

For it to be a legally binding contract, your construction proposal must include all the parties involved and your client’s details; spelled correctly with no mistakes, and they must sign it.

The construction proposal also details what their obligations and liabilities are, as well as any information or resources they are required to provide. Once again, the construction bid proposal is a safeguard for you and your clients.

Payment schedule

This section is very important for your company’s cash flow. It sets out the terms and conditions of payment. There may be local construction industry laws and regulations that may dictate some of the conditions, but this section can safeguard you against clients refusing to pay because they have a dispute. Here, you can layout whether the client makes payments as you reach milestones or that the client makes them on certain dates. Also, you can include when payments for extras or unforeseen issues are to be paid.

Start and finish dates

Adding the start and finish date of the proposed project is also very necessary because the costs that you establish often are based on the job going ahead at a certain time. If the dates alter, then it is quite possible that the price of materials and labor may change, too. You should also include the date the notice to go-ahead with the project was given to all the contractors.

You should also note when milestones are to be achieved and who is liable for delays, depending on the cause of the delay–more safeguarding for you and your clients.

Now, there are several mistakes that builders make when estimating and making a construction bid proposal: 

Hidden defects and unforeseeable conditions

Often forgotten is the need to define who is liable for the costs of hidden defects and unforeseeable conditions.

These hidden issues may range from something common like mold behind the walls, to something less common like underground boulders that weren’t expected. In these cases, there will be extra costs associated with the testing, handling, cleanup, containment, disposal or destruction of the unforeseen issue. 

By adding this section to your construction proposals, you can save yourself a lot of time, money and conflict.

Schedule

In the construction project schedule, you must include the amount of time it takes to get permits and approvals, the order of work, and the order of completion. When creating your project timeline don’t forget to consider possible delays from weather,  delivery services and other factors outside your direct control.

Changes and extras

At the time of writing your proposal, there won’t be any changes or extras to apply. So, this is where you detail what happens and who is liable for anything that may come up after the build starts.

Warranty

Another safeguard of a construction proposal is the warranty section. Here you detail what work you are liable to fix and under what circumstances, and it also details what you are not liable for– normal wear and tear, for example.

Tips for creating a winning bid

There are no construction proposal templates that can guarantee that your bid will be the winning one every time. However, when you write proposals that are clear, accurate, personalized, include all the details necessary, and showcase your business, then you are on your way to landing your next project. 

Don’t forget to follow up on your budget proposal or your marketing proposals to bring in more potential clients. Make proposal follow-up part of your sales process.

Give your proposals a personalized touch

The difference between a good construction proposal template and a great proposal is its professional design. It could be as simple as finding a free construction proposal template, adding your company logo, changing fonts to reflect your business style and adding a cover letter. 

Pay attention to what your clients need, make the review of your proposal easy and make sure the clients read clear instructions and information throughout the proposals you create.

Focus on the details

It is super important to focus on the details in construction proposals. Make sure your quantity takeoffs are accurate, that they include everything, even descriptions, pictures or graphs. Give your clients clear and understandable information that they can rely on.

Use a construction proposal template to make sure you don’t miss anything.

Ensure your data is accurate

Make sure everything you include is accurate, any mistakes can damage your reputation and lose you bids. Your client wants to trust you, but errors make them wary.

Example of a construction proposal

Why you should use estimating software during the proposal process

As we pointed out earlier, getting your proposals done in a timely manner is crucial to winning project bids. Using cloud-based estimating software will help you get the job done about 80% quicker than doing it by hand and when deadlines are present, speed is a must.

The specific project proposal can then be stored with the rest of the project’s documentation, where it can be accessed quickly and from anywhere that has an internet connection. You can also store your construction proposal templates online for easy access, ready for your next construction project proposal.

When you win more bids, complete projects on time and you remain within the budget, then your profits will increase, and making money while saving time is what it is all about.

Why not save time, build your reputation, your business and your profit with us? Book a demo of our Buildxact estimating and project management software or start your 14-day free trial today. Your next project and your potential client could be one proposal away.

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Cost estimation can be carried out for a few reasons, for the same person or for different people involved in the construction project. Each cost estimation has a specific purpose in the building process. Here, we will explain how to estimate construction costs so you can win jobs, maintain your profit margin and improve your business’ reputation.

What is construction cost estimating?

Simply put, construction cost estimating is a way of deciding on a job’s feasibility, calculating a bid/quote or creating a project’s budget. It helps with planning, profit margins, resource management, and scheduling. It considers all the building costs necessary to complete a construction project – direct and overhead costs, then calculates the best price you can perform the job for. They can take a long time to prepare by hand or estimating software makes the work quicker, easier and more accurate.

When is the right time to estimate a job?

You need to begin the cost estimation process well before construction starts, while it is still in the idea stage. If you have no concept of the project’s costs, then you can’t give an accurate quote, or make a winning bid. You have no way of being sure that you are not taking on too much or whether you will make a profit or loss. A construction cost estimation can be reviewed after the building begins, but a detailed cost estimate must be produced before you start construction to avoid any issues or losses.

Agree on the project scope

The first step is to agree on the project scope, or the order of magnitude. This is where you determine your client’s expectations, the project’s function, complexity, and design. You also need to consider any legal or regulatory issues that can affect the building process, the locality of the project and things like eco-friendliness, or any other specialty concern the project must include.

Design phase

Once the project’s scope is agreed upon then a design is drawn up. A cost estimation at this stage looks at the materials and the construction process to consider the most cost-effective and practical path to take. The schematic design estimate is part of the construction documents that bids are formed from.

Estimating construction costs for bids

When creating a construction cost estimation for a project bid, data from the project’s construction documents like the design estimate, subcontractor’s quotes, quantity takeoffs – material costs, construction processes, direct and indirect costs and your profit margin are used to make a more detailed cost estimate. The better the total cost of your bid, while maintaining quality, the better your chances are having your bid estimate accepted.

For some projects, this can be the last stage. Even though your bid was rejected you still have the costs associated with preparing the bid. So, don’t forget that these costs have to be recouped too and may need to be covered by other projects that you have been awarded; an indirect cost that must be calculated into future estimates.

Construction estimates for project control

Project control estimates are done after the contract is signed but before the construction projects commence building. It allows for planning ahead and forecasting issues that might occur. With good project management, control estimates can keep the job on time and within budget. Making project owners and investors happy.

Who is responsible for cost estimating?

A large construction company may have its own dedicated construction cost estimators. Whereas a builder or subcontractor may prepare their own. However, anyone who has money or may have capital tied up in the success of the building project should be interested in the project costs. The smart cost estimators save themselves a lot of time and stress by using construction estimating software, like our Buildxact – estimating and construction management software.

Construction costs to include

You need to include everything that comes with a price tag, whether they are indirect or direct costs. Your indirect costs will include the rent and the maintenance costs of your office, taxes, utility bills and the costs of creating bids, including those not accepted. Direct costs include labor, materials and equipment. Let’s explore these further.

Labor costs

Labor costs are one of the biggest expenses in a construction project. It often makes up around 50% of the overall project costs; making it a crucial piece to get right. To get the labor cost you need to know how much time the project will take to complete and how long before it will commence. These considerations are especially important for building jobs that don’t start for a considerable amount of time or those that run for a long time. Bad weather and pay rises need to be factored in or your will have cost overruns and your profit margin will suffer.

Quantity takeoff

A quantity takeoff is a detailed list of all the materials needed for the building project to be completed. Such as doors, timber, carpet, air conditioners, nails, light switches, wiring, tiles, etc. Materials must be counted and measured correctly to ensure their actual costs don’t differ too much from the estimate costs. These building costs are crucial to an accurate estimate.

Material prices

From the quantity takeoff, an overall material cost can be determined. This must consider price rises, quantity discounts and delivery costs. Whether it is unit prices or linear length material cost accuracy is important to estimating construction costs correctly.

Equipment costs

Here, we calculate the costs of the equipment needed to complete the job. Whether it is something you purchase specifically for the job, you hire it or you already own it, the associated costs must be included. You must also consider the costs of running the equipment, transporting it and securing it if you need to leave it on site.

Different types of estimates

There are five types of cost estimates used in the construction industry. Each one is created for a different reason and can be done for the one person or for different people involved in the project. Perhaps the client wants to know what they can afford, a builder needs to ensure they make a profit, a construction company needs to produce a quote or an engineer’s estimate can show whether the building materials or construction methods are going to be too costly. Each estimate is crucial and should be carried out at the correct time to have optimum impact on the project.

Feasibility estimate

The first step should be the feasibility estimate. This is where you look at the order of magnitude, or scope, of the project and determine whether it is worth your time or not. Perhaps it uses a construction method your company isn’t set up to perform and would be too costly to implement, then now is a good time to know that, before you sink too much time into it.

This is the least accurate of the estimates performed for a construction project and is mostly based on historical data or previous experience. The main aim is to see whether you should even consider going forward with the project or not.

Intermediate estimate

Once you’ve decided the project is feasible, then you want to have an intermediate estimate, or base estimate created. This estimate looks deeper into the size, scope and complexity of the construction project, and considers any issues or challenges that may occur. It still isn’t a completely accurate estimate, it is based mostly on knowledge, previous experience and historical data, but not targeted, factual information.

Preliminary estimate

It is now that blueprint, or design data is incorporated into the cost estimates. The preliminary estimate categorizes the costs and begins to look at the design details. This is where calculation errors need to be picked up and corrected.

Substantive estimate

The substantive estimate is created after the design is agreed upon and adds more accurate material costs to the process. At this stage materials can be exchanged to lessen the costs, or it might show that the budget can allow for gold trims instead of silver. This is the time when the last of the changes should be made.

Definitive estimate

The last step is the definitive estimate. This is created after the contracts are signed and all alterations have been completed. At this step, everything should be agreed upon and details determined. This is the most accurate of the estimates and could be more aptly named as an accurate cost calculation. Once this is completed building construction can begin.

Construction estimates by hand

Traditionally, a construction cost estimate was carried out with a pen, slide ruler and a calculator. They took a lot of knowledge and skill by the estimator. Not to mention the time they consumed, it could be months or even a year of work before contracts are signed or construction starts. Estimates done by hand were prone to error and too many mistakes can bring a construction company to bankruptcy. Making the whole process a little scary.

The addition of spreadsheets made estimates for small building projects a little easier to do and easier to read, but they remained prone to error and relied on the skill of their creator. Thankfully, technology has greatly improved the accuracy and speed of doing construction cost estimates.

Improve the estimating process with building estimating software

Today, you don’t have to have years and years of experience and tons of contacts in the construction industry to be able to perform a construction cost estimate. With minimal knowledge and the right building estimating software, even you can create one. Software like the Buildxact estimating and construction management software will speed up the entire process by 80% and will give a more accurate cost estimation. Our software can provide accurate estimates, produce quality bids, monitor the project, schedule jobs and more.

Whether you are a builder with a small business or are part of a large construction company, your business will reap the rewards by using estimation software. You will get more accurate estimates, create better bids or quotes, maintain your profit margin and create a good reputation as a builder. All this, 80% faster than before.

Do yourself a favor and contact our friendly team at Buildxact and book a demo or get your 14-day free trial of our estimating and construction management software. Let us do what we do best, give you back your free time.

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